Kapsch TrafficCom. Report on the first quarter of 2018/19

Transcription

1 EN Kapsch TrafficCom Report on the first quarter of 2018/19

2 Selected key data. 2018/19 and 2017/18: refers to the respective fiscal year (April 1 March 31) Q1: first quarter of fiscal year (April 1 June 30) All figures presented in EUR million unless otherwise stated Earnings Data 2017/18 Q1 2017/18 Q1 2018/19 +/- Revenues % Share of ETC segment 75.2% 75.1% 75.6% 0.5%p Share of IMS segment 24.8% 24.9% 24.4% -0.5%p EBITDA % EBITDA margin 9.4% 9.6% 6.7% -2.9%p EBIT % EBIT margin 7.2% 7.1% 4.5% -2.6%p Result before taxes % Result for the period % Result for the period attributable to equity holders % Earnings per share in EUR % Business segments 2017/18 Q1 2017/18 Q1 2018/19 +/- Electronic Toll Collection (ETC) Revenues % EBIT % EBIT margin 10.3% 11.9% 5.8% -6.0%p Intelligent Mobility Solutions (IMS) Revenues % EBIT EBIT margin -2.0% -7.1% 0.3% 7.5%p Revenues by region 2017/18 Q1 2017/18 Q1 2018/19 +/- EMEA 63.7% 64.9% 64.5% -0.4%p Americas 30.2% 29.6% 29.3% -0.3%p APAC 6.1% 5.5% 6.2% 0.7%p Balance sheet data March 31, 2018 June 30, /- Total assets % Total equity 1) % Equity ratio 1) 37.0% 37.6% 0.7%p Net cash (+)/debt (-) 2) Gearing 3) 2.5% Capital employed 4) % Net working capital 5) % Cash flow 2017/18 Q1 2017/18 Q1 2018/19 +/- Net CAPEX 6) % Free cash flow 7) % Other information 2017/18 Q1 2017/18 Q1 2018/19 +/- Employees, end of period 5,259 4,829 5, % On-board units, in million units % 1) Incl. non-controlling interests 2) Cash and cash equivalents + other current financial assets - financial liabilities 3) Net debt/equity 4) Total equity + financial liabilities 5) Inventories + current tax receivables + trade receivables + current contract assets - trade payables - current tax payables - current contract liabilities 6) Investments for purchase and payments from the disposal of property, plant and equipment and intangible assets 7) Net cash flow from operating activities - net CAPEX Kapsch TrafficCom 2

3 Highlights Q1 2018/19. Revenues Q1 EBIT Q1 Earnings/share Q1 EUR million (-3.7%) EUR 7.1 million (-39.3%) EUR 0.21 (-60.3%) Deferments in certain projects caused results below expectation in the first quarter. Some of the revenues and earnings budgeted in the current fiscal year could be deferred into the next fiscal year. The general order situation remains positive. Outlook for the fiscal year 2018/19 adapted. Revenues and EBIT on previous year s level. Modernization of the truck toll system in Switzerland. Modernization of the roadside and central toll system components. Functional extension to establish interoperability with the European Electronic Toll Service (EETS). Maintenance and system operation through 2020, can be extended annually through Order value: Just over EUR 20 million. New business in Spain. León: Access control system for the historic center. Irún: Modernization of the Irun-Barrera toll system (joint venture with Construcciones Amenabar). Bilbao: Maintenance of the railway and tram ticketing systems over the upcoming four years (in collaboration with INSITEL). In Spain, solutions from Kapsch TrafficCom are now used in more than 20 cities all over the country. Efforts for follow-up business in nation-wide toll projects. Czech Republic: Tender for the new contract stopped, existing agreement with Kapsch TrafficCom runs until the end of 2019 at the latest. Poland: Tender stopped, existing agreement with Kapsch TrafficCom runs until the beginning of November Completion of the modernization of the Austrian truck toll system. The technical operations will be provided over a period of ten years, with the possibility of five extensions of one year each. Kapsch TrafficCom 3

4 Letter from the CEO. Dear Shareholders, Q1 2018/19: Revenues -3.7% EBIT -39.2% Outlook 2018/19: Revenues and EBIT on previous year s level Positive order situation. By the end of the year, decisions on major projects expected. The project business accounts for a significant portion of Kapsch TrafficCom s revenues (more than 25% in Q1 2018/19). It can occasionally happen that project milestones are reached in a different quarter than planned. Sometimes even a short delay (beyond the end of a reporting period) is enough to cause shifts between quarters. The reasons for this are diverse and can lie with customers, suppliers and, of course, with us. Therefore, I prefer to review and analyze the earnings of Kapsch TrafficCom over a longer period of time than, as required, per quarter. Delays in existing implementation projects (ETC segment) were also the primary reason that revenues and earnings in Q1 2018/19 fell short of expectations. I would like to emphasize here that we have not lost any significant orders, but there have been differences between the planned and current project progress in some projects for various reasons which were sometimes beyond our control. As a result, certain revenues and contribution margins could not be achieved yet. As a consequence, we have reduced our outlook for the fiscal year and are now assuming revenues and EBIT on the previous year s level. Higher currency losses weighed on the financial result in the first quarter; these amounted to a loss of EUR 3.7 million in total as compared to a loss of EUR 1.2 million in the previous year. A fictitious tax rate of 30% was applied to the pre-tax earnings (actual values are not calculated until the end of the fiscal year). All this led to a decline of more than 60% in the result for the period and to earnings per share of EUR Apart from the delays mentioned above, the order situation remains positive. For example, we were contracted to modernize the Swiss truck toll system as well as to handle its maintenance and system operation through 2020, which can be extended to By the end of the calendar year, we also expect decisions on the awarding of a number of major projects and should find out what will happen in the Czech Republic and Poland. In both countries, the tenders for nation-wide toll systems were canceled. Our teams are working hard to remain a strong partner for governments in toll collection. The strong balance sheet with an equity ratio of 37.6% provides us with support for new major projects, and the gearing ratio of 2.5% gives us sufficient flexibility in my opinion. I therefore remain optimistic about the future and hope that we will be able to report additional new business in the coming months. The Group s growth and increasing internationalization mean that internal measures for increasing operational excellence are constantly gaining significance. Better and more intensive global cooperation is essential for the performance and ongoing growth of Kapsch TrafficCom. Sincerely, Georg Kapsch Chief Executive Officer Kapsch TrafficCom 4

5 Analysis of the Results and Balance Sheet Q1 2018/19. Revenues by region. Americas 29% APAC 6% EMEA 65% Revenues and earnings. In the first quarter of the current fiscal year Kapsch TrafficCom s revenues reached EUR million and were thus 3.7% below the previous year s level (EUR million). Revenues for the current fiscal year are presented in accordance with the new accounting standard IFRS 15, however, the transition did not result in any deviation from the revenue recognition in the fiscal year 2017/18. The operating result (EBIT) was EUR 7.1 million and thus well below the previous year s figure of EUR 11.7 million. This corresponds to an EBIT margin of 4.5% (Q1 2017/18: 7.1%). Deferments within existing projects were mainly responsible for this decrease. Currency effects from operating activities had a positive effect in the first quarter of the current fiscal year. Despite positive effects from the valuation of the other investment Q-Free ASA, Norway, in the amount of EUR 0.9 million and lower interest expenses, the financial result declined in the first quarter of the current fiscal year to EUR -3.5 million compared to EUR -2.3 million in the same period of the previous year. The main reason for this was higher currency losses which burdened the financial result with a total of EUR -3.7 million (Q1 2017/18: EUR -1.2 million) and are mainly due to exchange rate fluctuations of the South African rand (ZAR) in respect to the euro (EUR). In the first quarter of 2018/19 a tax rate of 30% was applied to the Group s pre-tax result and gives rise to the tax expense of EUR -1.1 million. In the same period of the previous year tax expense amounted to EUR -2.6 million or 28.6% of the Group s pre-tax result. The profit for the period for the first quarter of 2018/19 was EUR 2.5 million (Q1 2017/18: EUR 6.6 million). The decrease of 62.3 % compared to the same period of the previous year is primarily attributable to the above mentioned effects in EBIT and in the financial result. The segments developed as follows in the first quarter: ETC revenues: EUR million (-3.1%). ETC revenues by region. APAC 7% Electronic Toll Collection (ETC). At EUR million, revenues in the ETC segment were 3.1% below the previous year s figure of EUR million and thus contributed 75.6% to total revenues (Q1 2017/18: 75.1%). The largest contribution to revenues (EUR 79.6 million, Q1 2017/18: EUR 86.0 million) continued to be generated in the EMEA region with the nation-wide toll projects in the Czech Republic, Poland, Belarus and Austria as well as projects in South Africa. The volume of implementation projects decreased slightly compared to the same period of the previous year. Revenues in the Americas region rose slightly from EUR 29.9 million to EUR 31.0 million in the first quarter. This was above all due to the revenues of Simex, which was fully taken over in the second quarter of the previous year. Americas 26% EMEA 67% In the APAC region a rise in revenues of EUR 1.5 million was recorded compared to the same period of the previous year. Revenues particularly increased in Singapore. In the first quarter of the fiscal year, a record number of 3.3 million on-board units were sold (Q1 2017/18: 2.9 million units). Increases were recorded particularly in the USA, Morocco, Spain and Russia, while sales in Norway, France and Turkey declined compared to the same period in the previous year. Kapsch TrafficCom 5

6 ETC EBIT: EUR 7.0 million (-52.3%). Revenues in this segment are broken down by business type as follows: in EUR million Q1 2017/18 Q1 2018/19 +/- Revenues % Implementation % Operations % Components % EBIT % EBIT in the ETC segment fell by 52.3% compared to the same period in the previous year and reached EUR 7.0 million. Cost of materials and other production services, as well as staff costs, increased in the first quarter of the current fiscal year, despite lower revenues. The operating currency result improved by EUR 4.1 million to EUR 0.9 million compared to the same period in the previous year (foreign exchange gains increased by EUR 1.8 million and foreign exchange losses decreased by EUR -2.3 million). Other operating expenses fell slightly by EUR 1.4 million. In addition to lower foreign exchange losses (EUR -2.3 million), lower maintenance costs (EUR -0.9 million) were the reason for this decline, while increases in IT expenses (EUR +0.8 million) and in legal and consulting fees (EUR +0.9 million) counteracted the positive effect. IMS revenues: EUR 38.7 million (-5.5%). IMS revenues by region. APAC 2% Intelligent Mobility Solutions (IMS). Revenues in the IMS segment fell to EUR 38.7 million (-5.5%) in the first quarter of 2018/19, contributing 24.4% to total revenues (Q1 2017/18: 24.9%). While revenues in the EMEA region increased (+8.9%), they decreased in the Americas region by 17.8% and in the APAC region by 46.7%. Revenues in this segment are broken down by business type as follows: Americas 40% EMEA 58% in EUR million Q1 2017/18 Q1 2018/19 +/- Revenues % Implementation % Operations % Components % EBIT % IMS EBIT: EUR 0.1 million (>100%). EBIT in the IMS segment amounted to EUR 0.1 million in the first quarter and was significantly above the previous year s level (Q1 2017/18: EUR -2.9 million). Cost of materials and other production services decreased sharply compared to the same period in the previous year. Staff costs and other operating expenses also fell, resulting in an increased EBIT. Financial situation. The balance sheet total of Kapsch TrafficCom as at June 30, 2018 amounted to EUR million (March 31, 2018: EUR million). Assets. On the assets side of the balance sheet loans to other investments as well as the valuation of other investments in connection with the first-time adoption of IFRS 9 led to an increase in other non-current financial assets and investments. Contract assets are presented separately for the first time in accordance with IFRS 15 (non-current: EUR 2.1 million; current: EUR million). Previously, amounts due from customers for contract work as well as for service and maintenance contracts (March 31,2018: EUR 83.9 million) were included in trade receivables and other current assets. As a result of the separate presentation, trade receivables and other current assets fell by EUR million in total. In addition, trade receivables in Austria, the USA and South Africa decreased. Cash and cash equivalents decreased by EUR 21.2 million compared to the level as at March 31, This was mainly due to the negative free cash flow in the first quarter and payments from the acquisition of minority shares. Kapsch TrafficCom 6

7 Liabilities and equity. On the liabilities side of the balance sheet contract liabilities are presented separately for the first time in accordance with IFRS 15 (non-current: EUR 13.6 million; current: EUR 23.4 million). Previously, amounts due to customers for contract work (March 31,2018: EUR 31.5 million) were included in other liabilities, which consequently fell significantly. Other liabilities and deferred income are thus EUR 42.6 million lower, including the payment of earn-out liabilities from the acquisition of Kapsch Telematic Services GmbH, Vienna, in the amount of EUR 3.5 million. The increase in equity by EUR 1.4 million to EUR million compared to March 31, 2018 resulted from the total comprehensive income for the period amounting to EUR 1.8 million, whereby the first-time adoption of the new standards IFRS 15 and IFRS 9 had a negative impact of EUR -0.5 million. The equity ratio as at June 30, 2018 was at 37.6% (March 31, 2018: 37.0%). Key figures. While amounts due from customers for contract work being part of the position trade receivables and other current assets have already been included in the calculation of net working capital, amounts due to customers for contract work being part of the position other liabilities and deferred income have not been included. The separate presentation of current contract liabilities which is required in accordance with IFRS 15 prompted Kapsch TrafficCom to consider this position in the calculation of net working capital as of June 30, The first-time inclusion resulted in a decrease of net working capital to EUR million as at June 30, 2018 (March 31, 2018: EUR million). After reporting a net cash of EUR 16.2 million as at March 31, 2018, the Group showed a net debt of EUR 5.8 million as at June 30, 2018, corresponding to a gearing ratio of 2.5% (March 31, 2018: n/a). Cash flow. Net cash flow from operating activities amounted to EUR million in the first quarter of the fiscal year (Q1 2017/18: EUR -3.0 million). The decline is due to the lower operating result in the reporting period (EUR -4.6 million) and the decrease in the amount of EUR -6.3 million in trade payables and other current payables including contract liabilities (Q1 2017/18: EUR +1.3 million) and in the amount of EUR -8.4 million in trade receivables and other assets also including contract assets (Q1 2017/18: EUR -3.9 million). Net cash flow from investing activities amounted to EUR -4.3 million in the first quarter of 2018/19, which is lower than the figure in the first quarter of 2017/18 (EUR -1.3 million). EUR 0.9 million were paid in the first quarter for the acquisition of additional shares in IMS Zambia. The net CAPEX for property, plant and equipment and intangible assets were roughly at the previous year s level. Furthermore, loans of EUR 2.0 million were given to other investments. Net cash flow from financing activities was also negative at EUR -4.4 million in the first quarter (Q1 2017/18: EUR +0.4 million), the majority of which was due to the settlement of earn-out liabilities from previous acquisitions. Free cash flow (net cash flow from operating activities minus net CAPEX) of EUR million was significantly below the previous year s figure of EUR -4.3 million. Free cash flow decreased despite stable net CAPEX, as a result of the decline in operating result and the negative effects from net working capital. Cash and cash equivalents as of June 30, 2018 amounted to EUR million (March 31, 2018: EUR million). Vienna, August 22, 2018 The Executive Board Georg Kapsch André Laux Alexander Lewald Chief Executive Officer Executive Board member Executive Board member Kapsch TrafficCom 7

8 Condensed Consolidated Interim Financial Information as of June 30, 2018.* ) Kapsch TrafficCom Consolidated statement of comprehensive income. All amounts in TEUR Note Q1 2017/18 Q1 2018/19 Revenues (6) 164, ,218 Other operating income (7) 1,292 2,709 Changes in finished and unfinished goods and work in progress Other own work capitalized Cost of materials and other production services -58,464-59,220 Staff costs -59,922-61,993 Amortization and depreciation -4,024-3,461 Other operating expenses (8) -31,893-29,171 Proportional operating result of joint ventures (12) 78 Operating result 11,717 7,111 Finance income 1,043 1,113 Finance costs -3,377-4,654 Financial result -2,334-3,540 Results from associates and joint ventures (12) Result before income taxes 9,259 3,570 Income taxes (9) -2,644-1,075 Result for the period 6,615 2,496 Result attributable to: Equity holders of the company adjusted 1) 6,756 2,682 Non-controlling interests adjusted 1) Earnings per share from the result for the period attributable to the equity holders of the company (in EUR) 6,615 2,496 diluted and undiluted Other comprehensive income for the period Items subsequently to be reclassified to the result for the period: Currency translation differences 798-2,547 Currency translation differences from net investments in foreign operations -2,833 2,366 Fair value gains/losses on financial assets: Fair value gains/losses recognized in other comprehensive income Fair value adjustments of cash flow hedges Income tax relating to items subsequently to be reclassified to the result for the period Total items subsequently to be reclassified to the result for the period -1, Total items subsequently not to be reclassified to the result for the period 0 0 Other comprehensive income for the period net of tax (10) -1, Total comprehensive income for the period 5,323 1,771 Total comprehensive income attributable to: Equity holders of the company adjusted 1) 5,431 2,000 Non-controlling interests adjusted 1) ,323 1,771 Earnings per share relate to 13.0 million shares. 1) Non-controlling interests were adjusted for the first quarter of the fiscal year 2017/18. Details see note 16. *) The condensed consolidated interim report has neither been audited nor been reviewed by an auditor. Kapsch TrafficCom 8

9 Kapsch TrafficCom Consolidated balance sheet. All amounts in TEUR Note March 31, 2018 June 30, 2018 ASSETS Non-current assets Property, plant and equipment (11) 21,409 20,470 Intangible assets (11) 70,798 69,754 Interests in associates and joint ventures (12) 7,502 8,519 Other non-current financial assets and investments (13) 23,170 27,888 Non-current contract assets (13) 2,088 Other non-current assets Deferred tax assets 12,399 12, , ,331 Current assets Inventories 38,889 43,506 Trade receivables and other current assets (13) 254, ,002 Current contract assets (13) 112,444 Current tax receivables 7,563 8,215 Other current financial assets (13) 2,804 2,678 Cash and cash equivalents (13) 181, , , ,490 Total assets 621, ,821 EQUITY Capital and reserves attributable to equity holders of the company Share capital 13,000 13,000 Capital reserve 117, ,509 Retained earnings and other reserves 100, , , ,471 Non-controlling interests -1,045-1,099 Total equity 229, ,372 LIABILITIES Non-current liabilities Non-current financial liabilities (13, 14) 141, ,516 Liabilities from post-employment benefits to employees 23,706 23,906 Non-current provisions (15) 8,911 8,018 Non-current contract liabilities (13) 13,623 Other non-current liabilities (13) 4,292 3,727 Deferred tax liabilities 1,910 2, , ,352 Current liabilities Current financial liabilities (13, 14) 26,675 26,612 Trade payables (13) 58,255 53,795 Current contract liabilities (13) 23,388 Current tax payables 3,354 3,676 Current provisions (15) 9,600 11,464 Other liabilities and deferred income (13) 112,758 70, , ,097 Total liabilities 391, ,449 Total equity and liabilities 621, ,821 Kapsch TrafficCom 9

10 Kapsch TrafficCom Consolidated statement of changes in equity. All amounts in TEUR Attributable to equity holders of the company Noncontrolling interests 1) Total equity Share capital Capital reserve Other reserves Retained earnings Carrying amount as of March 31, , ,509-40, ,335-1, ,306 Effects from decrease in shares of subsidiaries adjusted 1) Dividend Result for the period 1) 6, ,615 Other comprehensive income for the period: Currency translation differences 1) -1, ,327 Fair value gains/losses on available-for-sale financial assets Fair value adjustments of cash flow hedges Carrying amount as of June 30, 2017 adjusted 1) 13, ,509-41, ,092-1, ,630 Carrying amount as of March 31, , ,509-47, ,515-1, ,930 Adjustments due to new IFRSs (see note 3) 1,603-2, Deferred taxes on adjustments Reclassification from other reserves to retained earnings Carrying amount as of April 1, 2018 adjusted 13, ,509-45, ,911-1, ,425 Effects from capital contribution in a subsidiary Dividend Result for the period 2, ,496 Other comprehensive income for the period: Currency translation differences Fair value gains/losses on financial assets 0 0 Fair value adjustments of cash flow hedges Carrying amount as of June 30, , ,509-46, ,593-1, ,372 1) Non-controlling interests and effects from decrease in shares of subsidiaries were adjusted for the first quarter of the fiscal year 2017/18. Details see note 16. The registered share capital of the company amounts to EUR 13,000,000. The share capital is fully paid in. The total number of ordinary shares issued is 13,000,000. The shares are ordinary bearer shares and have no par value. Kapsch TrafficCom 10

11 Kapsch TrafficCom Consolidated cash flow statement. All amounts in TEUR Note Q1 2017/18 Q1 2018/19 Cash flow from operating activities Operating result 11,717 7,111 Adjustments for non-cash items and other reconciliations: Scheduled depreciation and amortization 4,024 3,461 Increase/decrease in obligations for post-employment benefits Increase/decrease in other non-current liabilities and provisions 2) -1, Increase/decrease in other non-current receivables and assets 1) Increase/decrease in trade receivables (non-current) Increase/decrease in trade payables (non-current) Other (net) ,105 13,456 7,734 Changes in net current assets: Increase/decrease in trade receivables and other assets 1) -3,920-8,446 Increase/decrease in inventories ,617 Increase/decrease in trade payables and other current payables 2) 1,308-6,292 Increase/decrease in current provisions -3,986 1,864-6,838-17,491 Cash flow from operations 6,618-9,756 Interest received Interest payments -1, Net payments of income taxes -8, Net cash flow from operating activities -2,960-10,774 Cash flow from investing activities Purchase of property, plant and equipment (11) -1,102-1,042 Purchase of intangible assets (11) Purchase of securities, investments and other non-current financial assets -39-2,032 Payments for the acquisition of shares in at-equity-consolidated entities (12) Proceeds from the disposal of property, plant and equipment and intangible assets Proceeds from the disposal of securities and other financial assets 0 73 Net cash flow from investing activities -1,343-4,340 Cash flow from financing activities Contributions from shareholders in a subsidiary Payments for the acquisition of non-controlling interests ,250 Increase in non-current financial liabilities (14) 8 0 Increase in current financial liabilities (14) 2, Decrease in current financial liabilities (14) ,257 Net cash flow from financing activities 388-4,418 Net increase/decrease in cash and cash equivalents -3,915-19,532 Change in cash and cash equivalents Cash and cash equivalents at beginning of year 211, ,835 Net increase/decrease in cash and cash equivalents -3,915-19,532 Exchange gains/losses on cash and cash equivalents -2,596-1,657 Cash and cash equivalents at the end of the period 204, ,646 1) Including contract assets. 2) Including contract liabilities. Kapsch TrafficCom 11

12 Selected notes to the condensed consolidated interim financial information. 1 General information. Kapsch TrafficCom, headquartered in Vienna, Austria, is a global supplier of superior Intelligent Transportation Systems (ITS). The Group operates in two segments: Electronic Toll Collection (ETC) Intelligent Mobility Solutions (IMS) The Electronic Toll Collection (ETC) segment comprises activities relating to the installation and the technical and commercial operation of toll collection systems. Projects are generally awarded by public agencies or private concessionaires in the context of tender procedures. Toll collection systems may comprise both individual road sections and nation-wide road networks. The manufacture and procurement of components both for the expansion and adaptation of the systems installed by Kapsch TrafficCom and on behalf of third parties complete the portfolio of Kapsch TrafficCom; toll services further complete it. The Intelligent Mobility Solutions (IMS) segment comprises activities relating to the installation and the technical and commercial operation of systems for traffic monitoring, traffic control and traffic safety. Projects for the monitoring of utility vehicles and for electronic vehicle registration, as well as intelligent parking solutions and systems for intermodal mobility (networked modes of transport), are also allocated to this segment, as are systems and services for operational surveillance of public transportation and environmental installations. Components related business also completes the range of IMS services offered by Kapsch TrafficCom Group. 2 Basis of preparation. This condensed interim financial information for the first quarter ended June 30, 2018 has been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the IASB, as adopted by the EU, according to IAS 34 Interim Financial Statements, and should only be read in conjunction with the annual financial statements for the year ended March 31, The interim report was neither subject to an audit nor to a review by an auditor. For ease of presentation, amounts have been rounded and, unless indicated otherwise, are presented in thousands of euros (TEUR). However, calculations are done using exact amounts, including the digits not shown, which may lead to rounding differences. 3 Accounting policies. The accounting policies adopted in this condensed interim financial information for the first quarter ended June 30, 2018 are generally consistent with those of the annual financial statements for the year ended March 31, 2018, and described therein, except for the application of the following new or amended IFRS and IFRIC: New/amended IFRS Published by the IASB and adopted by the EU Applicable to fiscal years beginning on or after Material impact on Group's consolidated financial statement IFRS 15 Revenue from Contracts with Customers May 2014 January 1, 2018 Described below IFRS 15 Clarifications to Revenue from Contracts with Customers April 2016 January 1, 2018 Described below IFRS 9 Financial Instruments July 2014 January 1, 2018 Described below IFRS 4 Applying IFRS 9 with IFRS 4 September 2016 January 1, 2018 None AIP Amendment of IFRS 1 First-time adoption of International Financial Reporting Standards and IAS 28 Investments in Associates and Joint Ventures December 2016 January 1, 2018 None Classification and Measurement of Share-based Payment Transactions June 2016 January 1, 2018 None IFRS 2 IAS 40 Transfers of Investment Property December 2016 January 1, 2018 None IFRIC 22 Foreign Currency Transactions and Advance Consideration December 2016 January 1, 2018 None Kapsch TrafficCom 12

13 IFRS 15 Revenue from Contracts with Customers regulates the recognition of revenue, replacing IAS 11 and IAS 18. Kapsch TrafficCom applies the new standard, including the clarifications to IFRS 15, for the first time in the fiscal year 2018/19 (from April 1, 2018) using the modified retrospective method. This results in no deviation from the previous revenue recognition and thus no equity effect arises from to the first-time application of the standard. The presentation and disclosure requirements of IFRS 15 are met in this condensed interim financial information, to the extent applicable to IAS 34. The Group has carried out a comprehensive analysis of customer contracts and implemented a software solution that calculates the required accrued revenues for all customer projects differentiated according to the different performance obligations. Revenues from implementation projects are recognized according to the percentage-of-completion method, but IFRS 15 includes new criteria for recognizing revenues over a certain period of time. The implementation projects meet the criteria for fulfilling the performance obligation over a certain period of time, since assets are created for which there is no alternative use and the Group has a legal claim to payment of the services already provided. Revenues from operations (services such as operating and maintenance services as well as other services) are recognized in the reporting period in which the corresponding service was rendered. Since the customer benefits from the service rendered, revenues from operations under IFRS 15 are recognized on a periodic basis. When selling components, in contrast to IAS 18, which follows a risks and rewards approach, it must be judged when the transfer of control for a good takes place. At that point in time revenues are recognized under IFRS 15. Certain costs incurred in obtaining or fulfilling a contract, must be capitalized in accordance with IFRS 15 if the criteria are met. In the first quarter of 2018/19 and in the fiscal year 2017/18, no such costs eligible for capitalization were incurred. IFRS 9 Financial Instruments addresses the classification, recognition and measurement of financial assets and financial liabilities. IFRS 9 maintains the mixed measurement model with simplifications and creates three valuation categories for financial assets: amortized cost, fair value through other comprehensive income and fair value through profit or loss. The classification depends on the business model of the company and the characteristics of the contractual cash flows of the financial asset. Investments in equity instruments are generally required to be measured at fair value through profit or loss. Only at initial recognition the irrevocable option of recognizing changes in the fair value in other comprehensive income can be elected. The only exception concerns liabilities designated as at fair value through profit or loss, for which changes in fair value due to changes in own credit risk are now to be recognized in other comprehensive income. Kapsch TrafficCom applies the new standard for the first time in the fiscal year 2018/19 (from April 1, 2018), with the exception of the new rules of hedge accounting, and takes advantage of the practical facilitations. The comparative figures for the fiscal year 2017/18 were not adjusted. The following information relating to IFRS 9 is relevant: Debt instruments that were classified as available-for-sale (AFS) instruments according to IAS 39, are categorized at fair value through profit or loss according to IFRS 9. Debt instruments, that include cash flows that are solely payments of principal and interest and that are held within the business model, are classified at amortized cost according to IFRS 9. Equity instruments that were valued as available-for-sale (AFS) instruments according to IAS 39, are categorized at fair value through profit or loss according to IFRS 9. In the first quarter of 2018/19 the investment in Q-Free ASA, Norway, is included in this category. Other investments included in the balance sheet of the Group that were valued at amortized costs, and were not available for sale, are valued at fair value through other comprehensive income (without recycling) according to IFRS 9. The investments in ParkJockey Inc., USA, and Traffic Technology Services Inc., USA, are included in this category in the first quarter of 2018/19. For new investments the decision of the category will be made individually. Derivative financial instruments continue to be classified as fair value through profit or loss. Derivative financial instruments that are designated as cash flow hedges remain in the category hedging instruments of IAS 39. Trade receivables, other financial assets and liabilities continue to be valued at amortized cost according to IFRS 9. There are no liabilities designated as at fair value through profit or loss. As the Group does not sell trade receivables as part of factoring, the corresponding rules of IFRS 9 are not relevant. The Group uses the simplified model for trade receivables without a significant financing component as well as for contract assets in the meaning of IFRS 15 and calculates the impairment in the amount of credit losses expected over the term accordingly. The expected credit loss is determined on the basis of a provision matrix, in which the financial assets are broken down according to the age structure and the respective default rates are determined for different age bands. To create a provision matrix, historical data about actually occurred failures are considered first. However, in addition to the historical perspective, the Group also considers future-oriented information and expectations. Contract assets have similar risk criteria as trade receivables not yet due and therefore use the same loss rates. Kapsch TrafficCom 13

14 The application of the new standard IFRS 9 as of April 1, 2018 led to the following adjustments in equity: The valuation of other investments increased equity by TEUR 1,603, on the other hand the additional impairments due to expected credit losses of trade receivables and contract assets decreased equity in the amount of TEUR -1,846 and TEUR -408 respectively. Considering deferred taxes, the negative effect in equity results to TEUR Due to the reclassification of securities that were valued as available-for-sale according to IAS 39 and are now valued at fair value through profit or loss according to IFRS 9, cummulated gains are reclassified in equity from other reserves to retained earnings in the amount of TEUR 86. The disclosure requirements of IFRS 9, to the extent applicable to IAS 34 reports, are included in this report. First-time adoption of IFRS 15 and IFRS 9. The following amounts as of March 31, 2018 were adjusted due to the first-time adoption of IFRS 15 and IFRS 9: March 31, 2018 April 1, 2018 Carrying amount Adjustments due to new IFRS Carrying amount adjusted Trade receivables and other current assets 254,394-85, ,645 Trade receivables including impairment 133,600-1, ,754 Amounts due from customers for contract work 76,966-76,966 0 Amounts due from customers for service and maintenance contracts 6,937-6,937 0 Other receivables and prepaid expenses 36, ,891 Contract assets including impairment (non-current and current) 83,495 83,495 Other financial assets and investments (non-current and current) 25,974 1,603 27,577 Securities 3, ,714 Derivative financial instruments Investments 10, ,657 Investments (at fair value through comprehensive income without recycling) 6,622 1,357 7,979 Fixed-income securities 2, ,214 Other financial assets and loans 2, ,859 Contract liabilities (non-current and current) 31,486 31,486 Other liabilities and deferred income (non-current and current) 117,050-31,486 85,564 Amounts due to customers for contract work 31,486-31,486 0 Other liabilities and deferred income 85, ,564 Deferred tax assets 12, ,545 Equity 229, ,426 Carrying amount as at March 31, , ,930 Adjustment of impairment of trade receivables and contract assets -2,254-2,254 Adjustment of valuation of investments 1,603 1,603 Adjustment of deferred taxes Not yet effective standard IFRS 16. IFRS 16 Leases specifies the recognition, measurement, presentation as well as disclosure requirements with regard to leases in financial statements. The Group will not apply the standard prematurely and plans to use the simplification rules and not to provide comparative figures for the previous period. The Group has begun an initial analysis of the contracts and a process for selecting a software solution. The most significant effect is expected to result from the capitalization of assets and liabilities arising from operating leases for motor vehicles and buildings as well as IT equipment. Regarding the disclosure of non-cancellable operating leases as of March 31, 2018, please refer to the annual financial statements as of March 31, Kapsch TrafficCom 14

15 4 Material accounting estimates and assumptions. In the context of the preparation of the condensed consolidated interim financial information, the Group makes judgements, estimates and assumptions in relation to the application of accounting methods and the reported amounts of assets, liabilities, income and expenses. The actual results may differ from these estimates. All estimates and judgments are continually re-evaluated and are based on historical experience and other factors, including expectations as to future events which are believed to be reasonable under the given circumstances. The estimates made by the Management are in line with those adopted in the annual financial statements as of March 31, 2018 and described therein. Fair value measurement. The Group bases its fair value measurement of assets and liabilities on observable market data to the greatest extent possible. The fair value can be assigned to one of various levels within a fair value hierarchy using a number of evaluation techniques. Further information on the fair value measurement can be found in note Risk management. The financial risks to which Kapsch TrafficCom is exposed are described in the annual financial statements for the year ended March 31, 2018 and have not changed significantly since then. 6 Segment information. The table for the first quarter of the fiscal year 2018/19 shows revenues by performance obligation pursuant to IFRS 15, which also correspond to the business type. Q1 2018/19 ETC IMS Total Revenues 119,561 38, ,218 Implementation 25,058 16,317 41,376 Operations 67,176 19,601 86,777 Components 27,327 2,739 30,066 Operating result 6, ,111 EBIT margin 5.8% 0.3% 4.5% Q1 2017/18 ETC IMS Total Revenues 123,363 40, ,260 Implementation 27,118 18,569 45,688 Operations 69,814 20,103 89,917 Components 26,431 2,225 28,656 Operating result 14,637-2,921 11,717 EBIT margin 11.9% -7.1% 7.1% The following table shows those customers who contributed more than 10% of revenues in the first quarter of 2018/19 or in the same period of the previous year. The order of these customers is based on the amount of revenues in the current reporting period. Q1 2017/18 Q1 2018/19 Revenues ETC IMS Revenues ETC IMS Customer 1 19,349 x x 24,894 x x Customer 2 19,452 x 21,428 x Customer 3 14,884 x 17,076 x Customer 4 10,686 x 16,734 x Kapsch TrafficCom 15

16 7 Other operating income. Q1 2017/18 Q1 2018/19 Exchange rate gains from operating activities 417 2,381 Sundry operating income ,292 2,709 Exchange rate gains from operating activities in the first quarter of 2018/19 mainly relate to gains from exchange rate fluctuations of the currencies USD, SEK and AUD in respect to EUR. 8 Other operating expenses. Q1 2017/18 Q1 2018/19 Communication and IT expenses 4,230 4,818 Legal and consulting fees 3,620 4,707 Rental expenses 4,556 4,437 Travel expenses 2,814 3,022 Marketing and advertising expenses 1,958 2,176 License and patent expenses 1,402 1,577 Automobile expenses 1,701 1,546 Maintenance 2,182 1,478 Insurance costs 1,189 1,259 Exchange rate losses from operating activities 3,821 1,058 Allowance and write-off of receivables ,250 Other 4,780 4,342 31,893 29,171 Exchange rate losses from operating activities in the first quarter of 2018/19 amounted to TEUR 1,058 primarily due to exchange rate fluctuations of the currencies PLN and ZAR in respect to EUR. Allowance for bad debt was disposed of in the amount of TEUR 1,250 in the first quarter of 2017/18. 9 Income taxes. Income taxes relate to current taxes and to deferred tax assets and deferred tax liabilities. In the first quarter of 2018/19 a tax rate of 30% was applied to the Group s pre-tax result and gives rise to the theoretical value for the tax expense/income. At year end, the effective tax expense/ income may differ from the above due to, among others, different tax regimes in the various countries, the treatment of tax losses, tax allowances and permanent differences. 10 Other comprehensive income for the period. Q1 2018/19 Before taxes Tax expense/ income After taxes Fair value gains/losses on financial assets: Unrealized gains/losses in the current period Currency translation differences -2, ,547 Currency translation differences from net investments in foreign operations 2, ,774 Fair value adjustments of cash flow hedges Fair value changes recognized in equity In the first quarter of the fiscal year 2018/19 no fair value changes were recognized through other comprehensive income. Kapsch TrafficCom 16

17 Q1 2017/18 Before taxes Tax expense/ income After taxes Fair value gains/losses on available-for-sale financial assets: Unrealized gains/losses in the current period Gains/losses recognized in the result for the period Currency translation differences Currency translation differences from net investments in foreign operations -2, ,125 Fair value adjustments of cash flow hedges Fair value changes recognized in equity -2, ,292 The unrealized gains/losses on available-for-sale financial assets recognized in the first quarter of the fiscal year 2017/18 amounting to TEUR -20 relate to fair value changes of available-for-sale securities, that have been recognized through other comprehensive income in equity. 11 Capital expenditure. Q1 2017/18 Q1 2018/19 Carrying amount as of March 31 of prior year 95,126 92,207 Additions 1,350 1,845 Disposals Depreciation, amortization and other movements -4,030-3,461 Currency translation differences Carrying amount as of June 30 of fiscal year 91,564 90, Interests in associates and joint ventures. Q1 2017/18 Q1 2018/19 Carrying amount as of March 31 of prior year 2,131 7,502 Addition Share in operating result 0 78 Share in result from financial investments Currency translation differences Carrying amount as of June 30 of fiscal year 1,932 8,519 thereof shares in associates 1,931 0 thereof interests in joint ventures 1 8,519 Proportional results from associates and joint ventures are split in the presentation in the income statement. Results from associated companies and joint ventures whose activities and strategic directions are part of the core business of Kapsch TrafficCom are reported in the operating result. Results from other associates and joint ventures are reported in the result before income taxes. Details on associates and joint ventures can be found in the annual financial statements for the year 2017/18. In the first quarter of 2018/19, another one percent share in Intelligent Mobility Solutions Ltd., Zambia, was acquired and Kapsch TrafficCom now holds 51% in the company. Since there was no adjustment to the partnership agreement and the representation rights in the committees that direct the relevant activities until June 30, 2018, there is joint control based on the contracts and circumstances, and Intelligent Mobility Solutions Ltd., Zambia, is accounted for as a joint venture in the first quarter of 2018/19. Kapsch TrafficCom 17

18 13 Financial instruments by category. March 31, 2018 June 30, 2018 Carrying amount Fair value Carrying amount Trade receivables and other current assets 254, ,002 Fair value At amortized cost 217, , , ,716 Trade receivables 133, , , ,716 Amounts due from customers for contract work 76,966 76,966 Amounts due from customers for service and maintenance contracts 6,937 6,937 At fair value through profit or loss Derivative financial instruments (Fair value level 2) Hedging instruments Derivative financial instruments Cash flow hedges (Fair value level 2) Other non-financial assets 1) 36,879 37,280 Contract assets (non-current and current) at amortized cost 114, ,531 Other financial assets and investments (non-current and current) 25,974 30,566 At fair value through profit or loss 13,717 13,717 14,858 14,858 Securities (Fair value level 1) 2) 2,906 2,906 3,106 3,106 Derivative financial instruments (Fair value level 2) Investments (Fair value level 1) 2) 10,657 10,657 11,565 11,565 At fair value through other comprehensive income (without recycling) 6,622 6,622 8,197 8,197 Investments (with option of fair value through OCI, fair value level 3) 3) 6,622 6,622 8,197 8,197 At amortized cost 5,636 5,636 7,511 7,511 Securities (Fair value level 2) 2) Fixed income deposits 2,214 2,214 2,047 2,047 Other financial assets and loans 2,822 2,822 4,865 4,865 Cash and cash equivalents at amortized cost 181, , , ,646 Financial liabilities (non-current and current) at amortized cost 168, , , ,442 Promissory note bond (Fair value level 2) 73,622 71,497 74,299 72,760 Other financial liabilities (Fair value level 2) 94,812 90,151 94,828 90,682 Trade payables at amortized cost 58,255 58,255 53,795 53,795 Contract liabilities (non-current and current) at amortized cost 37,011 37,011 Other liabilities and deferred income (non-current and current) 117,050 73,890 At amortized cost 46,073 46,073 9,785 9,785 Amounts due to customers for contract work 31,486 31,486 Variable purchase price components (earn-out, fair value level 3) 12,751 12,751 8,514 8,514 Other financial liabilities 1,836 1,836 1,271 1,271 At fair value through profit or loss Derivative financial instruments (Fair value level 2) Hedging instruments Derivative financial instruments Cash flow hedges (Fair value level 2) Other non-financial liabilities 1) 70,970 63,948 1) Non-financial receivables and liabilities are only included for reconciliation with the respective balance sheet item. 2) Shown as available-for-sale financial assets (AFS) as at March 31, ) Shown as other investments as at March 31, 2018 Kapsch TrafficCom 18

19 Fair value-hierarchies and determination of fair value: Financial assets and liabilities have to be classified to one of the three following fair value-hierarchies: Level 1: There are quoted prices in active markets for identical assets and liabilities. In the Group, the investment in Q-Free ASA, Norway, as well as listed equity instruments are attributed to level 1. Level 2: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques based on direct or indirect observable market data. This category comprises available-for-sale securities, such as mortgage bonds and government bonds, which are quoted, however not regularly traded on a stock market, derivative financial instruments and financial liabilities. Specific valuation techniques used to value financial instruments include: Quoted market prices for securities. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves. The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date, with the resulting value discounted to present value. The fair value of other financial liabilities classified as level 2 was determined by discounting the gross cash flows over the contracted term, using a risk-adjusted interest rate. Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments. Level 3: Financial instruments whose valuation information is not based on observable market data are classified to the level 3 category. Variable purchase price components (earn-out) and unlisted equity instruments fall into this category and are based on agreed conditions and the expectation of the future sales/earnings development of the respective subsidiaries or investments. Long-term purchase price components are discounted using a risk-adjusted interest rate. Level not specified: The carrying value of these items, which are valued at amortized cost, is a reasonable approximation of the fair value in accordance with IFRS Therefore no fair value-hierarchy is disclosed. No reclassifications between fair value-hierarchy levels were made. Level 3 earn-out liabilities and investments. The development of level 3 earn-out liabilities is as follows: Earn-out liabilities Q1 2017/18 Q1 2018/19 Carrying amount as of March 31 of prior year 11,851 12,751 Disposal ,250 Interest Carrying amount as of June 30 of fiscal year 11,129 8,514 The valuation of other investments which are valued according to level 3, is based on the company valuations of these entities. In the first quarter of 2018/19 no adjustment was made. Impairment on trade receivables and contract assets. Impairment on trade receivables decreased by TEUR 471 and impairment on contract assets increased by TEUR 158 in the first quarter of 2018/19. Both effects were recognized through profit or loss in the statement of comprehensive income. Non-current and current financial assets and investments. The additions to non-current and current financial assets mainly relate to loans to other investments and joint ventures. The valuation of investments that are classified at fair value through profit or loss led to a gain amounting to TEUR 908 which was recognized in total comprehensive income for the period in the first quarter of 2018/19. Kapsch TrafficCom 19